Melanie Patten, THE CANADIAN PRESS
Published Monday, November 12, 2012 12:26PM AST
Last Updated Monday, November 12, 2012 3:44PM AST

HALIFAX -- A company looking to drill an oil and gas test well near Cape Breton's largest freshwater lake says it remains committed to the project despite the loss of a potential partner because of protests over the development.

Neal Mednick, president of Petroworth Resources Inc., said Monday the unidentified company was days away from a possible deal when it stepped away from negotiations about three weeks ago.

"One of the parties -- the discussions were fairly advanced -- decided to not proceed primarily based on, I guess, the rather vehement opposition," Mednick said from his office in Toronto.

Mednick said the Western Canadian company was in talks to be a farm-in partner, meaning it would pay for the cost of drilling the well near Lake Ainslie in exchange for a percentage interest in the property.

"There are other interested parties and we're hopeful we'll get a deal done, but it's an obvious setback," said Mednick.

"As discouraging as it is, we're still determined to get the well drilled."

Opponents who say they're concerned about possible groundwater contamination from the project have staged protests and even taken their fight to the Nova Scotia Supreme Court.

A citizens group launched a judicial appeal earlier this year in hopes of quashing the drilling permit granted to Petroworth Resources. The Margaree Environmental Association argued the provincial environment minister was wrong to approve the permit because the proposed 1,200-metre well would be too close to a stream that feeds the lake.

But the court dismissed the bid in August, concluding the minister acted fairly and the group was not denied an opportunity to voice its concerns.

The provincial government later granted Petroworth Resources a one-year extension of its drilling permit. It now expires July 15, 2013.

Neal Livingston, a spokesman for Margaree Environmental Association, said Monday that news of a potential partner backing away from the project was a victory for his group.

Livingston said he's hopeful other potential partners will follow suit.

"We're just hoping that the company isn't able to find any other investors because it's not an appropriate place," Livingston said from Cape Breton.

"In some ways we're thinking that maybe this is a win on this issue."

Protesters, including members of the Mi'kmaq Warrior Society, have held demonstrations recently near the Canso Causeway in an effort to draw attention to the project and their concerns.

Mednick said he remains optimistic the drilling will be done before the permit expires, though he conceded there's some concern that ongoing opposition to the project could have a negative impact on negotiations with other companies.

He said western Cape Breton has already seen its share of oil drilling, with five or six wells drilled in the late 1800s near Lake Ainslie.

The company has also said its proposed drill site sits atop a well that produced oil for export to the United States in 1875.

"The well that we propose to drill is going to undergo tremendous scrutiny and supervision, and I can assure everyone that it will be drilled safely," said Mednick.